Commerce Department launches audit of steel tariff waivers

A contractor guides a steel beam into place while working on the Korean Air Lines Co. Wilshire Grand hotel and office building in downtown Los Angeles, California.

The Commerce Department’s internal watchdog has launched an audit of waivers that companies have received from tariffs on foreign steel and aluminum.

The agency’s system for granting such exclusions has come under heavy fire. The tariffs were imposed in late May, and Commerce was initially overwhelmed by companies seeking relief from the 10 percent tariff on aluminum and 25 percent tariff on steel. Nearly 50,000 requests for exclusion have been filed so far, according to the agency.

In addition, a New York Times analysis found that Nucor and United States Steel, two major domestic steel companies with strong ties to the Trump administration, successfully blocked hundreds of company requests. The NYT also reported that Commerce granted a waiver to Rusal America, the domestic division of a Russian firm that was under U.S. sanctions. Commerce eventually reversed its decision.

A Commerce spokesman said the agency has brought on additional staff, including 70 contractors, to accommodate the increased workload.

The chaotic process caused an uproar on Capitol Hill, with lawmakers calling for reforms. Even Republican senators have questioned the usefulness of the tariffs and highlighted the collateral damage in other sectors of the American economy.

Democratic Sen. Elizabeth Warren had called for the Commerce inspector general to open an investigation into the exclusion process. Her office reviewed 900 submissions submitted in the first month of the process and found that 81 percent of the waivers granted were to foreign-owned firms. It also discovered the exclusion for Rusal.

“President Trump said that his tariffs would help American steel manufacturers, but investigations by my office showed that Chinese- and Japanese-owned companies have received hundreds of exemptions,” the Massachusetts Democrat said in a statement to CNBC. “I asked the independent Inspector General to open an investigation into this mess, and I’m glad that they are doing so.”

The inspector general’s announcement did not provide a timeline for the audit. The notice said it will evaluate whether Commerce followed proper procedures in granting the exclusions and whether the decisions were made in a “consistent and transparent manner.”

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